Chips: A Year of Cheap Phones and Tremendous Competition, Says Linley Group

By Tiernan Ray

In an interesting year-end look-back, Microprocessor Report‘s Linley Gwennap, who is also principal of The Linley Group, which publishes the Report, today chronicles the shake-out in mobile chip makers, as Texas Instruments (TXN) said it would abandon its “OMAP” chip as far as phone and tablet sales, ST-Ericsson lost the financial support of ST-Microelectronics (STM), and Freescale Semiconductor (FSL) cancelled an ambitious chip development project. (Microprocessor Report articles require a subscription.)

“Farmers know that it’s a good idea to rotate their crops from year to year,” writes Gwennap. “The past year has seen more than its share of crop rotation in the mobile-processor market, with vendors coming and going at a record pace.”

Some of the shake-out is a result of what had been merchant chips being replaced by custom silicon, such as Apple (AAPL) designing its first custom CPU for its A-series microprocessors for the iPhone.

There was the rise of cheap smartphone chips, notes Gwennap, with Taiwan’s MediaTek (2454TW) making a big splash. That was prompted by rising sales of cheap phones. In China, for example, half of all smartphones sell for less than $160, notes Gwennap.

Those cheap smartphones increasingly take advantage of bundled, and in some cases, integrated WiFi circuitry, which is a threat to the dominant WiFi supplier, Broadcom (BRCM) :

The company’s share of the smartphone market is only 5%—much lower than its 63% share of the Wi-Fi market. In other words, Broadcom has more to lose than to gain from the trend toward bundled Wi-Fi.

At the same time there was the quad-core craze for high-end phones, he observes, which Nvidia (NVDA) kicked off a year ago with its “Tegra” line. Qualcomm (QCOM) followed with its “Krait” architecture, which is already showing up in handsets, and even MediaTek with something called the “MT6589,” and Huawei (the “KV32“), despite the fact that “the actual value of the extra cores remains modest at best,” according to Gwennap’s review of performance data.

“Smartphone buyers, however, quickly concluded that four is better than two and began seeking out quad-core phones.”

Qualcomm has the performance lead with its “APQ8064” quad-core processor based on ARM Holdings‘s (ARMH) technology but with its home-brewed Krait CPU, writes Gwennap. “Qualcomm became the first vendor to ship a processor with four next-generation A15-class CPUs.”

but he expects Nvidia and Samsung Electronics (005930KS) to catch up by mid-2013, though Qualcomm may retake the lead with a process shrink of its chip.

Gwennap notes Intel (INTC) made progress in phones, and he expects the company to make even more progress as it moves its mobile “Atom” chips to the next shrink in transistor size, though it’s not clear whether it will be enough:

Intel finally got into the smartphone-processor market, notching several design wins for its third-generation Atom processor, code-named Medfield. (Don’t ask about the first two generations.) Extensive testing shows that Medfield’s power is similar to that of other high-end smartphone processors, and its performance exceeds that of most dual-core Cortex-A9 processors. But competitors’ quad-A9- and dual-A15-class products prevented Medfield from making a huge splash. We expect Intel’s 22nm Atom, code-named Merrifield, to generate more-impressive results, assuming it ships on schedule in mid-2013 [...] Even with this improvement, however, we don’t expect Intel to gain the performance lead on CPU-centric benchmarks such as Antutu, CoreMark, Quadrant, or Vellamo.

Gwennap concludes by saying that while the low end of the smartphone market will be where most of the chip sales growth is in 2015, nevertheless the phone vendors will continue to push the appeal of higher-end quad-core models, which may force Apple to increase its cores from two to four. He expects Samsung and Apple will be the two chip designers most capable of mitigating the tremendous power drain of the Cortex-A15 in high-end phones.

Correction: A prior version of this article incorrectly quoted Gwennap as saying Qualcomm uses ARM’s Cortex-A15 CPU, when in fact what he said is that Qualcomm’s Krait CPU of its own design is an “A15-class CPU.” My apologies for any confusion caused by the error.

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There are 6 comments

DECEMBER 31, 2012 3:08 P.M.

ValleyOracle wrote:

I have to use what options I have so using the comments option to wish you Tiernan!
Wishing you happiness, peace, fulfilling success and the best of everything this coming new year!

DECEMBER 31, 2012 3:19 P.M.

jay wrote:

it seems like Intel is going to conquer mobile very soon like they did with PCs.

DECEMBER 31, 2012 3:22 P.M.

Tiernan Ray wrote:

ValleyOracle: Thanks very much! And the best to you!

DECEMBER 31, 2012 5:31 P.M.

newbietech wrote:

Ray, your article quotes Gwennap as saying that, "Qualcomm has the performance lead with its “APQ8064” quad-core processor using ARM Holdings‘s (ARMH) “Cortex A-15” architecture".
I don't know how Gwennap can confuse the two. Anybody in the tech world writing about processors and their core design should know this by now.
Qualcomm uses its own proprietary cores (Krait) for APQ8064 and other Snapdragon S4 processors.
Qualcomm does not use ARM Holdings‘s (ARMH) “Cortex A-15” architecture".

DECEMBER 31, 2012 5:51 P.M.

Tiernan Ray wrote:

Newbietech: In fact, what Gwennap said was that Krait is an "A15-class" CPU in the 8064. It was my own mistake to characterize him as saying Qualcomm uses the A15, when, as you rightly point out, it is Krait. My apologies, and thank you for pointing out the error. I corrected the text and made note of it at the bottom of the post.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.